Passenger Demand Moderates from Recent Peak but Stays Strong

Published on : Friday, July 7, 2017

The International Air Transport Association (IATA) announced global passenger traffic results for May showing that demand (measured in revenue passenger kilometers, or RPKs) rose 7.7% compared to the same month in 2016. This was slower than the 10.9% growth recorded in April. However, this still was well ahead of the 5- and 10-year average growth rates. Capacity climbed 6.1%, and load factor rose 1.2 percentage points to 80.1%, which was a record high for the month.

All regions, excluding the Middle East and North America, posted record-high May load factors.

After adjusting for inflation, airfares at the start of the second quarter were around 6% lower than a year ago. IATA estimates that this contributed to around two-fifths of the annual growth in passenger traffic seen in May. However, the degree of fare stimulus is around half that seen in the second half of 2016. This stimulus is likely to fade further in light of rising airline cost pressures, while business confidence has softened. However, passenger demand is likely to remain well supported during the upcoming peak travel months of July and August.

“Passenger demand is solid. And we don’t foresee any weakening over the busy summer months in the Northern Hemisphere. But the rising price of fuel and other input costs is likely to see airlines’ ability to stimulate markets with lower fares taper over the coming months. In parallel, rising trade protectionism and barriers to travel are worrying trends that, if unchecked, could impact demand. As a business airlines depend on borders that are open to trade and people,” said Alexandre de Juniac, IATA’s Director General and CEO.